Unfortunately the geopolitical temperature was turned up overnight. Iran launched missiles at US forces in Jordan overnight, which were intercepted, and the US and Saudi Arabia targeted Iran-backed groups in Iraq. That in turn triggered sharp verbal reprisals from the Iraqi government. Before the open, President Trump said that the US will launch strikes against Iran in response to the earlier attacks in Jordan. Oil responded by erasing all of yesterday’s decline, and has continued to move higher. Despite the strength, yields were only slightly higher and the S&P 500 opened down only 0.1%. It’s been a steady march lower from there, however as 7400 failed to hold. Not helping matters was a report from The Telegraph later in the morning that China is sending rocket launchers to Iran.

As we awaited the Fed decision this afternoon and more hyperscaler earnings tonight, the S&P was down over 1% at its lows but has cut the losses in half. The complexion is a mirror image of yesterday with 7/11 sectors lower. The equal-weight was outperforming but the bounce in the market-weight index has put both at a similar performance. Small caps are getting hit harder as the Russell 2000 is down over 1%. The Dow is also lagging as declines in the highest-priced constituents Goldman Sachs (-3%) and Caterpillar (-6%) weigh on the index.

Sector-wise, Energy is the obvious leader with oil’s sharp reversal higher. Comm Services, Staples and Healthcare are the other sectors flat to higher. Earnings from Mondelez (+5%) is adding to the relative strength for Staples in the risk-off move. Healthcare is seeing strength in Med Devices, boosted by solid earnings reactions to BSX, GEHC as well as AVTR. The consistently lagging group continues to build on solid gains this month. GOOG moved to session highs, up over 1%. Industrials is the lagging sector today, with several negative earnings reactions. Materials is broadly lower, especially building/housing and miners. Over in Tech the theme remains the same: semis are getting hit again while software is holding up.

The Iran attacks and subsequent Trump response have sent oil prices higher, reversing almost half of this week’s decline. ICE Brent is up ~8% and near session highs ~$90. US nat gas prices have crept into positive territory and Europe is higher as well. Metals are lower, though gold regained $4000 after briefly slipping below it earlier. Ag is mostly lower with corn/soy extending this week’s losses. Bitcoin is slightly lower, trying to hold its 50d ma ~$63.75.